Barnes & Noble’s Sensible C.E.O. Choice

Barnes & Noble, which had been without a C.E.O. since it fired William Lynch, last July, finally named a new boss on Wednesday. While the appointment of a new C.E.O., particularly at struggling companies, often leads to tumult, that’s less likely to be the case at B. & N., since, instead of hiring from outside, the company instead promoted Michael Huseby from within. Huseby had been running B. & N.’s Nook division, which he took over when Lynch was fired. But his background is in finance; he started at B. & N. as the company’s chief financial officer, and he was also the C.F.O. at Cablevision years ago.

From one angle, this might look like a disappointing move. Instead of bringing in a high-profile candidate to remake the company, B. & N. is playing it safe. And at a time when plenty of outside observers, including many in publishing who want the company to succeed, are saying that B. & N. needs to dramatically improve the retail experience at its stores, putting a finance guy in charge of things doesn’t seem like a confidence-building move.

The reality, though, is that promoting Huseby makes a good deal of sense. To begin with, hiring from within is generally an underrated strategy. It’s tempting for underperforming companies to believe that only an outsider can solve their problems, particularly since corporate boards already tend to see C.E.O.s as “corporate saviors,” as the Harvard Business School professor Rakesh Khurana puts it. In fact, studies suggest that senior executives hired from outside are likelier to fail than those hired from within. It’s not that companies should only look inside for potential hires; outsiders can shake up ossified ways of thinking. But the search for a corporate savior is usually an exercise in wish fulfillment rather than a sensible business strategy. And as the disastrous tenure of Ron Johnson at J. C. Penney shows, outside C.E.O.s with glamorous credentials and revolutionary plans can do enormous damage.

Huseby’s promotion is reassuring, then, because it suggests that B. & N.’s board, and in particular its chairman (and the company’s founder) Leonard Riggio, isn’t panicking. As I argued in the magazine this summer, while B. & N. faces enormous challenges, its core business of bookselling is still reasonably solid, and it still has enormous assets, including both its real-estate holdings and its brand name, that it can capitalize on more effectively than it has in the past. B. & N. doesn’t need a savior. It needs a manager.

Can that manager be a finance guy? It’s not that unusual a choice. C.F.O.s are not particularly likely to become C.E.O.s: according to one study, in 2009, just fourteen per cent of the C.E.O.s in the Fortune 500 had served as chief financial officers. But according to the search firm Spencer Stuart, the most common background for C.E.O.s in the U.S. is finance. And in recent years, the role of C.F.O. has become much more wide-ranging than it once was, so that C.F.O.s are now expected to be familiar with all corners of a business, as well as to be concerned with operational issues—someone like Indra Nooyi, who became the C.E.O. of Pepsi after being a C.F.O., is a good example of what the new model chief financial officer might look like.

Huseby obviously has the right skill set if B. & N. ends up engaging in some financial reengineering, like spinning off or selling the Nook division or even taking the company private. But even if B. & N. doesn’t take such dramatic steps, Husebey’s experience makes him a good candidate to run a company that’s trying to optimize its operations and get its costs under control.

In any case, B. & N. doesn’t actually need a retail guru as its C.E.O. Mitchell Klipper, who runs the company’s retail stores, is staying in place. And in Leonard Riggio, who essentially reinvented the bookstore, it has a chairman who is one of the great retailers of the past half century. What the company needs is a C.E.O. who can focus on blocking and tackling, so that B. & N. can get back to delivering customers an experience that they value.

There’s a great model that Huseby would do well to study: the ongoing revival of Best Buy, another big-box store that people had written off as technologically obsolete, which turned itself around by better taking advantage of what it does well: offering a well-organized physical showroom. Barnes and Noble doesn’t need to radically reinvent itself (a strategy that would, in any case, likely be doomed to fail). It just needs to do a much better job of being what it is.

Photograph: Credit: Spencer Platt/Getty.

James Surowiecki is the author of “The Wisdom of Crowds” and writes about economics, business, and finance for the magazine.